On the Brink of Recession

In the last few days the world financial systems were shaken badly. Bankruptcies sent thousands of people to the streets. Share prices tumbled and investors lost their savings. Jakarta Stock Exchange activities were suspended for two and half days due to steep drop in the stock index. People were concern of the weakening currency. We were entering a period of severe economic turbulence.

I'm no expert, nor economist, and hence I'm not in the position to offer any financial advice. Leave it to the hands of the experts. It's the expert who says that while the wealth of middle class and upper class people were slashed down already, but the disastrous effect towards common people will likely be seen in the next few months when the world’s economy is stagnating.

The latest Indonesian government actions, however, supported by positive global financial development that involved trillion dollars of rescue package in the developed countries, have apparently tamed the local market for a while. Share prices and Rupiah were strengthening again.

The Capital Market Supervisory Board had issued regulation to allow companies to buyback their shares up to 20% of their stock from the paid-up capital without shareholders' approval. While the Finance Ministry issued new regulation to increase government guarantee up to Rp.2 billion from Rp.100 million of bank deposits. Bank of Indonesia also issued regulation to allow banks to use lending assets as collateral to increase Banks' access to liquidity resources.

Still, the government and the people need to continue preparing for the worst. Unnecessary denial statements of the looming economic hardship shall be avoided as it will irritate market, leave people in the dark and make them act as if nothing happens. The market needs honest, correct, firm, bold and timely action, while common people needs clear information, encouragement and guidance to survive the turbulence.

We should have learned a lot from 1998 economic crisis, and people shall now act more constructively. Power play, selfishness, greediness, shall be minimized.

Export business will be down but illegal products will still be flooding the market. Our customs and excise office is not strong enough to curb the rampant smuggling activities. It’s not difficult to find illegal products in the market though. It just needs commitment from the authority to discourage importer, malls, and shops to sell illegal products.

In order to help local people and industry during economic turmoil, people’s spending behavior shall be adjusted. My advice is to allocate 80% of our spending to help local economy when we really need it. When we are strong, then we shall spend more for legal imported products. The world is interconnected. We can’t take benefit at the expense of others for too long, as it will hit us back sooner or later.